Tasmanian Energy Market Update
We hope you enjoyed an "At Home Easter Break". Tracy and I are pleased to report improved attendance and interaction at evening meal times, which is our upside from Non-Essential travel restrictions!
This month Goanna celebrates a decade of collaboration with the Tasmanian Small Business Council (TSBC). Over the past 10 years the TSBC, with support, originally from the Consumer Advocacy Panel and more recently Energy Consumers Australia, have fought a largely behind the scenes battle, for fairness and equity in energy pricing for Tasmania's small business sector. The TSBC have advocated on issues spanning energy market deregulation, wholesale, retail and network pricing, reform and removal of tariff cross subsidies, as well as the challenges of Tasmania's natural gas market. We are delighted to mark this anniversary with the release of the TSBC's latest energy project, a submission of national significance on the proposed $3.5b second Vic-Tas undersea interconnector, known as Project Marinus, which we have highlighted below.
TSBC Project Marinus TasNetworks Submission:
As part of the Marinus Link Regulatory Investment Test – Transmission (RIT-T) process, the Tasmanian Small Business Council (TSBC) earlier this week provided a submission to TasNetworks on the Marinus Link, Project Assessment Draft Report (PADR). The proposed 1,500MW Vic-Tas second undersea DC Link could cost consumers $193m per annum (PADR p56) for 40 years. The TSBC Submission found that, despite the TasNetworks PADR improving some modelling techniques and assumptions, in conjunction with the draft ISP 2020, both sets of analyses have systematic biases that make their conclusions questionable. Download your TSBC Home Isolation reading here: "Consumer Review of the Project Assessment Draft Report (PADR) for Marinus Link".
Tasmanian Government Support for Business & Industries:
The Tas Gov have announced that, Electricity bills will be waived for the first quarterly bill received after 1 April this year for small business customers on Tariff 22, 94, 82 or 75, including those small businesses on market contracts that could access those tariffs. Electricity prices will be capped next financial year. For eligibility and more information contact your electricity retailer, on the telephone number listed on your bill for Account Enquiries.
Due Diligence in Renewable Energy Investments
Way back in our September 2017 Newsletter, the headlines were, "Sun Burns Red Hot for Solar Sellers, whilst Businesses Risk Blindness." In this edition we highlighted that the three "key factors" in determining the financial viability, NPV and payback period for most renewable energy proposals, were all experiencing "Peak Conditions" and that businesses should be wary of simply extrapolating these buoyant conditions forward. The Tasmanian branch of the Australian Institute of Company Directors (AICD Tas) engaged with Goanna and last year we conducted Director Briefings in Hobart, Launceston and Devonport, to explain these metrics and our due diligence processes. So lets take a look at the September 2017 Conditions and how these compare to the current market:
- Wholesale Energy Rates: In Sept 2017 Tas Cal18 was trading at 9.3c/kWh, this month Tas Cal21 was around 4.9c/kWh. To put this into perspective, a 100kW Solar system (~$150,000 Investment in 2017) installed in Tassie could be expected to produce around 135,000kWh over the course of a year. At 9.3c that's $12,555, but at 4.9c the return is almost halved, at only $6,615 pa;
- Renewable Energy Certificate Rates: In Sept 17, Spot LGC's were trading at $84.60, this month Spot LGC's have traded at $27.38/Certificate, less than a third of the Sept 17 value. Going back to our 100kW system, which could produce 135 Large Certificates per annum. In Sept 2017 the Certificates value was (135 * $84.60 = ) $11,421, but during April 2020 the spot price value is less than a third, at just (135 * $27.38 = ) $3,696.
So in less than three years, a system that could have been expected to produce energy and renewable certificate values of around $24K pa, could now be expected to produce just $10K pa in combined energy and renewables value, (excluding any avoided network cost benefits, discussed below);
- Ability to avoid Network Costs: Each year we run hundreds of Network tariff optimisations for our clients. Each year more sites save money by moving away from "c/kWh" Tariffs, like TAS94 and onto "Demand Only" Tariffs, such as TAS88 and TAS89. As/if/when TasNetworks undertakes further "Tariff Rebalancing", it is possible more sites will be incentivised to move to these new Demand based Network tariffs, where in the main, installations with solar cannot avoid paying their share of network costs.
Let's take a more in-depth look at these market conditions below, compliments of SavvyBI our Energy Analytics partners.
Tasmanian Spot price:
Apart from NSW, Year to Date 2020 has seen a solid dip in spot pricing across the NEM.
Tasmanian Forward Wholesale Market Tumbles
Over the past two months Goanna's competitive electricity tendering duo, Kelvin and Marc, have been flat out like lizards drinking, raising tenders and evaluating responses for many of Tasmania's leading enterprises, as forward market pricing sank to 4 year lows.
Large Generation Certificates:
LGC pricing continues to be a deciding factor in many competitive electricity tenders, as volatility prevails.
Water in Storage:
At 6th April, Hydro Tas Storage levels had declined to 37.8%, which is around 3% above the 10 year average for this time of year. The April Energy Security Report shows that this is 8% above the "Prudent Storage Level" and almost 20% above the "High Reliability Level" for the time of year. See below extract from the Economic Regulator's April "Energy Security Report".
Natural Gas Market Update:
Whilst AEMO continues to flag a gap in East Coast gas supply from Winter 2024, wholesale natural gas spot pricing has continued to fall. Goanna is working with large commercial and industrial natural gas users, preparing competitive tendering for new gas agreements, to commence supply from 1 January 2021.
COVID-19 BUSINESS & HARDSHIP SUPPORT:
A few nights ago my 20 year old son came home from work and we chatted in the study about his work day. After this, the topic moved on to how social distancing meant he was missing his mates but at least the camaraderie on the construction site was, whilst conducted at a safe distance, still in full swing. Speaking about his mates, he confessed that two had not made their 20th Birthdays. In both cases the most tragic part was that, they were both uniquely talented lads, for which no one seemed to know that there was anything wrong.
The lesson for me was that we still need to do more to help each other put our hands up when something is not right. I've put together some links to local energy retailers, Business Hardship support and Tas Government programs, all of which can help:
For further energy information please call Marc on 6223 7253.
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